Financial Decision-making a Positive for Ultra-Wealthy Families

Morgan Stanley Private Wealth Management and Campden Wealth Research today released the results of a new survey showing that financial decision-making within ultra-high net worth families in North America tends to have a marginally positive impact on relationships within families.

The findings are contained in the ‘Family Decision-Making’ report, and draw on a survey of 59 individuals from North American families of net worth in excess of $25 million who are actively involved in financial decision-making, as well as 15 in-depth qualitative interviews.

“To the uninitiated, it might be tempting to believe that formal decision-making regarding wealth puts a strain on family relationships. Instead, our study finds that it is proving to be beneficial for family relationships within ultra-high net worth families,” said David Bokman, Head of Ultra-High Net Worth Resources for Morgan Stanley.

When family decision-makers were asked, ‘to what degree does decision-making about family wealth impact their relationship with other family members’, 44% said it had a positive impact and 30% said it had little or no impact. Only 3% said it had a strong negative impact and 16% said it had some negative impact.

This is clearly evidenced when looking at the perceived outcomes of investment decision-making, where there are more governance structures, and non-investment decision-making, where there are less. The survey shows that investment decisions are clearer, more efficient, more effective, more responsive and better understood among all relevant family members.

Agreement with outcomes of decision-making around investments and non-investments (agree strongly and agree somewhat)

SOURCE: Morgan Stanley/Campden Wealth, Family Decision-Making

“Families should therefore be paying real attention to improving their governance and decision-making structure as this is the key success factor in the equation,” added Mr. Bokman.

Some of the individuals interviewed recognized this point. “Due to the small size of the family (principal, principal’s wife and his small children) we don’t have any family governance issues, but I am already thinking ahead to develop a next gen education program and governance framework for the future,” says the CEO of a large West Coast single family office.

The report maps what structures are currently in place, what is planned, and where the gaps might be. In the case of mission statements, for example, the majority of families polled either have a plan in place (51%) or they are developing one now (7%) or planning to in the future (7%). However, 34% have no mission statement and have no plans to address this. A family mission statement is a document put together to help families articulate their goals and values, and assist members in achieving alignment.

Morgan Stanley Private Wealth Management (PWM) is an established global leader in wealth management, dedicated to serving ultra high net worth individuals, families and their foundations. Founded in 1977, Morgan Stanley PWM has been committed to helping its clients preserve and grow their financial, family and social capital for over 30 years.

Morgan Stanley Wealth Management, a global leader, provides access to a wide range of products and services to individuals, businesses and institutions, including brokerage and investment advisory services, financial and wealth planning, cash management and lending products and services, annuities and insurance, retirement and trust services.

Campden Wealth is the leading independent provider of information, education and networking for generational family business owners and family offices globally in person, in print, via research and online.

Campden Research supplies market insight on key sector issues for its client community and their advisors and suppliers. Through in-depth studies and comprehensive methodologies, Campden Research provides unique and proprietary data and analysis based on primary sources.

Campden Wealth also publishes the leading international business titles CampdenFB, aimed at members of family-owned companies in at least their second generation and CampdenFO, the international magazine for family offices and private wealth advisors. Campden Wealth further enhanced its international reach and community in 2011 with the acquisition of the Institute for Private Investors (IPI), the leading membership network of private investors in the United States, founded in 1991 and with the establishment of Campden Family Connect PVT. Ltd a joint venture with the Patni Family in Mumbai, India in 2015.

About the study: The data examined in this study derive from a quantitative survey conducted from July to November 2015. The survey was designed to elicit respondent attitudes and behaviors concerning investment decision-making as well as provide a clear understanding of current portfolio construction, decision-making and governance structures within the family. The sample of respondents was derived from Campden Wealth’s existing community of ultra-high net worth individuals in North America. A total of 59 wealth holders engaged in the quantitative survey, with analysis and aggregation taking place in November and December 2015. To add context to the quantitative component of the study, as well as to garner deeper insight into the ultra-high net worth investor mind-set, 15 in-depth qualitative interviews with wealth holders were conducted. For the purposes of this study, ultra-high net worth is defined as coming from a family of net worth in excess of $35 million.